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Wednesday, May 15, 2013

The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation's most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.

8 comments:

This does help vs the previous arrangements as the loan proceeds go immediately to the education institutions that are mostly "non-profit" so this avoids the immediate "savings" of corporate profits of previous "for-profit" lenders...

The schools spend all of it sooner than if it went thru an inter-mediate "lender" which would peel off "profits" which are an $NFA leakage....

I would think that these flows are identified in the DTS under "Education Dept Programs":

Thru the other day, withdrawals were about 123B while deposits were about 23B so even though there is predicted a "profit" for this year, there is already a 123B leading $NFA flow this year out of Education which is about 60B greater than that we did back in 2008 for instance...

So with the leakage of the for profit entities "savings" taken out of the loop, this flow is $4$ more supportive than that under the previous arrangements...

These loans are now close to a "spend and tax" program like Dan described in his latest post at NEP here:

"We can issue a large sum of tokens or certificates, and demand that each person delivers back to the public a certain quantity of these tokens, according to any system that seems fair."

Where instead of "each person" it is "each student"... and the "system that seems fair" apparently is that the students pay back the "principle" PLUS "interest" (which is really just additional taxes) back to the govt sector....

That would mean that if the govt spent say $1 trillion, then they are asking back all that, plus interest (let's say 5%), or $1 trillion + $50 billion. (?) Right? Which would effectively be a 105% tax rate? Did I do that right? Is that what we think of students in our society?

$50 billion/yr at $20,000/yr tuition would be 2.5 million students w/ free tuition. How many college students in the US? Maybe just skip the loans and give out 2.5 million scholarships.

But sometimes lately I am trying to back away from these issues emotionally and try to just see them in almost pure math...

So under this current policy (which again yes is still nutters..) we are CLOSER to the type of policy Dan has recently blogged about over at the NEP... we more or less have gotten the banks out of this student loan loop... which imo moves the ball closer to where we want to be...

So now, with the broke dick banks out of the picture, we are just left with the policy morons who think the govt "has to make a profit", which via the math (as you point out) is crazy not to mention mathematically impossible...

So now what is being demonstrated to us is that there IS an alternative, where perhaps before it was TINA to private Student Loan securitizations, etc... that is all gone form the scene now...

So it may be easier at this point to point out to policy makers how to just get to public funding of higher education in the US as they are basically already doing it except for the tax implications on the students themselves...

This is also going on in the housing sector as the US govt now owns the GSEs which provide all of the credit for housing in the US...

So, if I can remove the emotion, we are in fact moving closer to what I consider an optimum policy but it is kind of interesting that this is happening even though "they know not what they do..." type of thing...

If we could just get them to see (mathematically) what they in effect are already doing, we may get some lightbulbs to go on for them and get some major policy changes going officially...

It should be easier now that it is no longer "the banks have always done that"...